Question

If $1600 earned simple interest of $56.24 in 2 months, what was the simple interest rate? The simple interest rate is % (Do not round until the final answer. Then round to the nearest tenth as needed.)

Answer 1

The interest rate is of 21.09% a year.

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E are the earnings, P is the principal(the initial amount of money), I is the interest rate(yearly) and t is the time.

So, for our problem, we have:

If $1600 earned simple interest of $56.24 in 2 months, so:

`P = 1600, E = 56.24`.

The interest value is a yearly value, however the time is given in months. This means that we have to divide the time by 12(that is the number of months in a year). So

`t = (2)/(12) = (1)/(6)`

Solution:

`56.24 = 1600*I*(1)/(6)`

`1600I = 6*56.24`

`1600I = 337.44`

`I = (337.44)/(1600)`

`I = 0.2109`

The interest rate is of 21.09% a year.